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Small-Cap Star Idera Pharmaceuticals (IDRA) popped on Thursday, climbing almost 11 percent on extremely heavy volume. Shares opened close to even, starting up 1.1 percent to $2.75 a share. However, the stock appeared to get caught up in the market momentum that carried the Nasdaq Composite to gains exceeding 1 percent by mid-day.

Stock Opens Even, Spikes Sharply an Hour Into Trading Day

Idera spiked to just over $2.90 just before 10:30 am ET and then kept climbing through noon ET. Shares reached an intraday high at $3.05, but investors appeared to hesitate after crossing the $3 a share level. They weren’t done, though, as the stock kicked again at around 2pm EDT, pushing to an intraday high of $3.19 before pulling back to close at $3.07 a share.

The key level to remember when looking at the day’s action would be $3.10 a share, Idera’s 50-day SMA. On May 30, Idera’s stock butted up against its 50-day SMA with an early-morning peak close to $3.25 a share and retreated sharply after that point.

Traders could be viewing the 50-day SMA as an important resistance level based on the retreat on May 30 after it hit that level. As such, the initial plateau at just over $3 a share, and the pull back behind the $3.10 level before close, could indicate that traders are watching the 50-day SMA closely in making decisions. However, the fact that it didn’t retreat after approaching that level could indicate that the stock is picking up strength.

This is especially true if you consider that Idera was likely one of the more attractive momentum plays on the day. If day traders flowed into the stock during its upswing, they would need to exit their position prior to the closing bell. So the stock’s retreat behind that $3.10 level in the final half-hour of trading may be as much related to those positions getting liquidated as the markets not believing Idera can push past that resistance level. This should become more clear over the next few days of trading, though.

Stock Market Conditions Could Explain Move

Anyone searching for a specific piece of news sparking the day’s gains may be stymied as Idera hasn’t issued a press release on May 28 about the company’s intention to present at the Jefferies 2014 Global Healthcare Conference. They presented yesterday, but if something contained in the presentation was moving the stock it most likely would have done so prior to 10:30 am EDT the day after. What’s more, there hasn’t been any news about IMO-8400, the company’s lead therapy.

Instead, the timing of the move appears to correspond with the broader upswing in the market that drove the Dow Jones Industrial Average, S&P 500, and, especially, Nasdaq Composite higher. The major indices opened even, appeared to lose ground for the first 45 minutes of trading, but took off after that before leveling off at around noon EDT.

This would be consistent with why Idera was identified among our Small-Cap Stars. The company showed strong Value Line Beta, a metric that shows how much the stock tends to correlate to the movements of the markets as a whole. One element that was consistent across many successful small-cap health care companies is that their stocks tend to gain more than the markets as a whole when those markets gain.

This shows that the stocks are familiar to investors and, in good times, they’re among the first in their industry to see an inflow of money by those investors looking for growth plays during a shift towards a risk-on environment. In Idera’s case, Value-Line Beta was the metric on which it hit the hardest. The company has an average daily volume of almost 2 million shares and is clearly a stock that has captured the attention of many health care investors.

Stock Climbing Despite Bearish Technicals

The day’s move may come as a surprise to some given that the stock’s chart patterns and technical data appeared to indicate it was due to continue a fall that can be traced back to early March when the Nasdaq and biotech first started slipping.

Most notably, the 50-day SMA crossed over the 200-day SMA from above on Friday of last week. Short-term moving averages crossing long-term moving averages are commonly referred to as a “death cross,” and are usually a sign of accelerating downward momentum.

Despite this, some factors may also point to Idera being overbought, with its 14-day RSI hovering between 50.0 and 60.0 and the stock briefly crossing over its upper Bollinger Band on May 29.

However, taken on the whole, Idera appears to be a stock poised to take off if the market can shake its current slump. It’s a well-known biotech play that’s been a focus for traders and investors alike for some time now. If the current swoon for small caps and growth plays comes to a close, Idera is most likely well positioned to jump onto any major gains.

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